MFS Communications Inc., an upstart telephone company that is poised to offer competition to Bell Atlantic Corp. in Maryland, accused the regional giant yesterday of filing a "meritless" lawsuit in an effort to intimidate rivals who criticize Bell Atlantic before regulators and legislators.
One week after Bell Atlantic sued the Omaha-based communications company in U.S. District Court in Wilmington, Del., MFS struck back.
In a letter to legislators and regulators, Royce J. Holland, MFS' president and chief operating officer, charged that Bell Atlantic's suit may be "an improper use of ratepayer funds" to silence smaller competitors. He noted that the suit came at a sensitive time, when MFS is involved in regulatory proceedings in several states in the Bell Atlantic region, including Maryland.
"Bell Atlantic is suing MFS for our lawful participation in the legislative and regulatory processes, for our vigilant efforts to point out the effect of various Bell Atlantic positions and pricing actions on the prospects for effective competition in the telecommunications markets, and for our exercise of First Amendment rights," Mr. Holland wrote.
Mr. Holland said his company is asking the Federal Communications Commission and state regulators to investigate whether Bell Atlantic was improperly recovering the costs of the litigation from ratepayers. He said the lawsuit would not deter MFS from criticizing Bell Atlantic.
MFS' reply was unusual in that it did not come in a legal filing with the court but as a public denunciation before congressmen and regulators who are making critical decisions affecting its ability to compete with the entrenched regional Bell companies for local telephone customers.
Among the recipients were Sen. Larry Pressler (R-S.D.), who chairs the Senate Commerce Committee; Rep. Jack Fields (R-Texas), who heads the House telecommunications subcommittee; Federal Communications Commission Chairman Reed Hundt; the Maryland Public Service Commission;and other state regulatory agencies in Bell Atlantic's territory.
In its suit, Bell Atlantic asked the court to declare that MFS has no basis upon which to sue it for anti-competitive conduct. It also asked the court to enjoin MFS from engaging in the interstate telephone business until it files specific rate information with the FCC -- which had permitted the company to file only maximum and minimum rates.
The suit is based on the phone company's perception that MFS was about to sue over Bell Atlantic's handling of the touchy issue of interconnection -- the process of linking its network with those of MFS and other competitors.
Interconnection, which is considered a vital prerequisite to competition in the local telephone market, will be the subject of hearings before the Maryland PSC this spring. Bell Atlantic cited MFS' statements before the Maryland PSC in an earlier round of hearings as one of the reasons it had concluded it was about to be sued.
John Thorne, associate general counsel of Bell Atlantic, dismissed Mr. Holland's letter as "completely bogus."
"It has nothing to do with gagging MFS. It has to do with getting all the facts out on the table," Mr. Thorne said.
Outside telecommunications experts described Bell Atlantic's legal strategy as unusual and expressed doubts about whether it really expects to prevail.
Richard E. Wiley, a Washington telecommunications lawyer and former chairman of the FCC, said "it's going to be a tough putt" to persuade a judge to enter a declaratory judgment in a complicated antitrust case.
"Maybe they are abusing the process, but I don't know whether you can get a federal judge to say so," he said.